"worldwide exchange" the headlines. advances stocks are down. ben bernanke outlined conditions for the fed to begin winding down its bond buying program possibly later this year, but there's a line between that and any coming of an eventual rate hike. shrinking factories out of china. hsbc slashed pmi down and a ten-month low. and britain's banking

watchdog said five out of eight main banks are falling short in 2012. they've announced they're going to start selling the taxpayer's stake in lloyds. >> lloyds is in a good position. investor interest is growing and shares are already trading at around a price they're selling which would reduce the national debt. that's something we want to see. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. good morning. we kick off with more news. the pmi 40.9. it's a little bit more than expected. in may, of it 27.2. there was an expectation it would be just over 48. new orders are falling a little bit.

euro dollar down a little bit. mr. bernanke and what he's saying about tapering. let's get some reaction on this pmi data. what are the implications of this number for q 2 gdp? >> this is another disappointing quarter for the eurozone. this was similar to what we saw in the opening quarter, but there are some reassuring signs. we seem to be seeing the contraction on a monthly basis easing in the second quarter. you might see some stabilizing. it's not all bad news. >> new orders from china are down. new orders here still sliding. >> still sliding but, again, what we're seeing is an easing

trend. china has reasonable growth in a downturn is slowing and what we're seeing from europe is a sharp downturn. it's coming closer to stabilization. not there yet. germany, eking out a little bit. there's contraction, easing but also the ftse is contracting in the east as well. >> does that mean we might get some growth in the eurozone as well by sometime in this quarter? >> that's what we're hoping. it will help the global economic picture which will help impact. we'll have a boost so that will have to play out. >> we'll talk about china in a minute. fed chair ben bernanke said the fedotenko start scaling back its bond buying program at the end of the year if the economy continues to improve. his comments at the meeting

shook the stock and bond market. it's greater optimism. the unemployment could drop to 6 point phone 5% in 2014. that's a year earlier than previously thought. they're still not concerned about inflation and think gdp might expand faster than 3% over the next two years. bernanke tried to draw a distinct line between tapering and the end of qe 2. >> the most important thing that i just want to convey again is that it's important not to say this date, that date, this time. it's important to understand our policies are economic dependent. so coming from the fed. equities sold off in the united states. you can see here just about 35,

40 stocks on the dow jones 500. ftse up 1 2/3. the pmi number. basic resources are the biggest seller. that comes off with china, hsbc pmi down at a nine-month low. new orders down. we're getting more on that from munich. the market reaction, this means commodities are weaker as well to date. spot gold down 3% this week. a long way from that high in 2011. 1308. copper down 2%. as far as bond markets are concerned, we saw a big pickup in the treasury yield yesterday.

2.35%. still going higher. 2.37%. gilts are at a high. 1.64%. the dollar, that will be across the board. dollar yen 98.16. we were at that 93 level. we've got the euro dollar at 1.32. and it's not just that, the dollar is doing better. just wanted to go back to that. a fresh 33 month low, 9322. the other emerging market as well. a fresh record low, 59.85 against the u.s. dollar. the rand is lower.

usd lower. the yield are narrowing in the minds of investors. having a big impact on asia. more on that in singapore. >> thank you, ross. indeed, asian markets took a beating from the double whammy of the fed's tapering and also the weak china manufacturing data. on average over 2% selloff. 3% was lost from the shenzhen. liquidity rates hitting a record high. over in hong kong at the hang seng, it slipped nearly 3% to a nine-month low. and the h-shares index in china tanked over 3%. it had slumped 20% year to date

and now hovering around its lowest level since 1988. the cash crunch fierce. look at shares of ccb. it lost over 5%. elsewhere, the nikkei 225 shed 1.75% today despite the weak yen. it had lost about 18% of its value since hitting its five and a half year high. remember, china is japan's. they're losing 3 to 4%, fanuc and komatsu. down over 2% today led by miners and banks. remember, china is their biggest customer and that tapering could also weigh on commodity prices further. investors also bet profits betting the dollar will fall further. back to you. >> all right. thanks for that.

we'll keep you updated on all the market action as we see spot gold now down at its lowest level since october 2010. we'll keep our eyes on all of that through worldwide exchange. china's economy is weakening. that flash pmi number, the hsbc figure down to a nine-month lo., eunice will break it down. what is the policy as well as the economy? >> well, a lot of people are asking that question. like you said, the numbers looked pretty bad. i mean, they were softening. we're seeing contraction in the manufacturing sector. no major surprise is there. export orders were down a bit more than what people expected. everybody is saying the economy is in this soft patch. when you talked about policy, so

there are a lot of voices now saying does the government need to come in and actually stimulate? do they need something to reverse this and stimulate the economy? the reason why people are thinking the government hasn't really been interested in doing this is so far in the past several months we haven't seen much action. that's another reason why people are getting more and more concerned about the credit crunch here. >> yeah. we'll see how that response goes. thanks very much. what's your own information about what it means? >> this is a very big number. what it's suggesting is after a first disappointing quarter, gdp growth in china, 7.7%, the manufacturing economy does not look good, could slow again in the second quarter. the export index, there's a

shock/surge contraction. exports very big for china's growth. what we're seeing is employment numbers coming in lower this month. that's impacted the domestic market. all of this is in the manufacturing sector heading into that soft patch. >> what does this mean for the rest of the region? >> again, china is a major exporter in the whole region. japan, east arab sharks and the rest of the global economy. what this would suggest is if export orders are falling sharply in china, that was in the case of the global economy. >> good to see you. thanks very much. all right. as you've seen, the fed and china were speaking to global investors.

they're suggesting the economy is ready to rebound. steve is there. he's with us for most of the show today. steve, what's going on in russia? >> i think it's fascinating watching the market reaction for ben bernanke. the people we're talking to are pretty relaxed about it. they see this as a sign that real growth is coming back in. regardless of what the market oscillation is in the very short term, ross, they see greater business opportunities and greater economic growth. very simple equation for them. if the market chooses to take a different reaction, that may be. that tells us a little bit more about the short term drivers of the market. we musn't forget where we're coming from on the hopes of a large economic rally. we've been talking to a lot of the ceos, haus sen, the boss of royal phillips. look, we're not waiting for economic growth. we're not sitting back on our hides. we're looking at our own

company, simplifying our own company. looking at structural changes we can put into our own company and cutting costs. that's what they're continuing to do. i would suggest they're not necessarily believing all they hear at the moment about economic growth prospects picking up in the united states. we've got a comment already from some big ceos that we spoke to on "squawk box." let's listen in. >> it takes a while to get into trouble. it takes a while to get out of trouble and all of that. i do not think you can blame ben ber kna bernanke for the financial crisis. we're on a gradual recovery on that one. we have to see others get there. one of the things we're most interested about here in terms of the d-20 and eventually the g-20. everybody has to get on this agenda and job creation. then you say, okay, so what are some of the things i've got to be doing to get there?

we'll take the easiest one, which is trade and investment. >> ben bernanke can flirt with ending his stimulus, but he is married to economic recovery. this is truly going to be data dependent. if the data starts to turn, he could increase the stimulus. so i think the people who are focused on the timing here are, indeed, getting a little bit ahead of themselves. >> the past couple of weeks we're now seeing this discussion about taking some liquidity off the market at some point. i think we've all been waiting for it to happen. the big question in my view is that we're looking at the fed's recovery globally so of course i guess that central bankers are now doing this, you know, restructuring, repetitioning in a way that will not be too detrimental to markets. so getting on with business, getting on with the dialogue as

well that's very important in the dialogue between the business community and the g-20 which meets back in this town in st. pete terseberg in september as well. i thought mark made an impressive comment, maybe if we don't see the economic growth, not only will there not be a cut in stimulus, you may see stimulus picking up as well. that's something the market is not picking about. >> big onus that the fed has that right. there's necessary volatility. the other thing, steve, we're seeing quite clearly this morning is the selloff in merging market currency and more pressure on the brick as well. i'm wondering what people are saying and the response they're getting in russia? >> here's an absolutely extraordinary thing. we have at the moment full blown quantitative easing. we have the full blown moments and how are the brick evaluations looking? well, let's just go through it.

the s&p 20, broader emerging trading just over 10 times pe. russia, 4.8 forward pe. they're telling me that -- they're telling me that the full blown qe is in place. we're trading five times the russian equities. i can't help thinking there are other factors at play here as well. anyway, we'll be thinking to some great guests on "worldwide exchange." we've got john chambers coming up. that's the first time that's coming up. we're about ten minutes over at cisco. one hour after that we have the wca coming on. i spent my week in ireland and he's been an advocate of multi-nationals. they're going to be talking,

very interesting. francisco sanchez is the director of commerce in the obama administration. it will be interesting to see how he sees the growth of the economy going in the united states. packed show here. i'm sure you've got some time for other stuff as well. >> nice to see they've got you a desk. you look comfy. >> it's absolutely enormous. i have to tell you, i've been sharing this for the last 3 1/2 hours with another anchor. >> it's emotional being there with you, no doubt. >> i'm told it's very emotional. some of those emotions border on anger sometimes. >> we look forward to today and tomorrow as well. plenty more to come out. we'll catch you a little bit later. let's get a final hit on the market. your own version on the united states. let's just pick up on this point. the fed is better -- the fed has

got it right. do you think they have? >> i think they've got some. i think the difficulty we're seeing in the u.s. is what they have to do -- their main focus in terms of meeting the stimulus is on the unemployment rate. what they're looking for is 6.5% unemployment and that's still not in place yet. so until that comes about, i think they'll continue to signal. they'll consider taking out but until that comes about -- >> thanks for joining us. plenty more to come through today as well. let's bring you a reminder of what's coming up. fed chairman ben bernanke, expert analysis and what that means on the day of trading. we'll have live reports. let's find out how america's business leaders are preparing.

cisco systems here, the first here. we check with george to see the end of state controlled banks in a highly anticipated speech last night. we'll have the latest at 10:45. and pressure to respond to fair point's spinoff proposal from down low. what did he tell investors at last night's shareholder meeting. we'll have the latest from singapore. we're looking for the gold treasury to go higher. [ kitt ] you know what's impressive?

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>> announcer: you're watching "worldwide exchange." let's just remind you where we stand this morning on the markets. we're seeing treasury yields continue to head higher first thing and here we go, treasury up 2.3%. 2.26, that's the high since march last year, the 10 year gilts. spot gold continuing to sell off higher. it's at 1313. it had been down to 1304 as

well. a sour review, that's how they handled fairpoint's proposal to spin off the company's entertainment unit. they say the suggestion 20% of the movie and music business requires more scrutiny. it's required for a time frame for the decision. joining us from singapore, thanks for joining us. they don't want to respond too publicly to down low, but what pressure is he putting? how effective are his actions on the rest of the board? >> clearly this is going to be a very big decision sony has to take. probably the biggest decision they've taken in the history of the organization. it's an opportunity in the sense that they've not been able to leverage the benefits that each of the individual pieces of the

business bring together when it's coming together. so it is pretty fair in asking to unlock the value of the entertainment business and use the funds to bring this business back to profitability. >> yeah. in the near term how do you get the right valuation for the business? what do you think they should do? >> you know, firstly, they need to evaluate are they able to leverage the synergies of these independent businesses. they clearly have not been able to leverage the synergies of these businesses between the entertainment and the television and the mobility and the electronics pieces of that business. if you believe that they will not be in a good position to get the synergies, they need to separate the businesses and get the right valuation from the

entertainment piece and as such that will help them have a better focus in the different pieces of the business. so it is a decision keeping in mind and knowing that over the last several years they've not been able to do it. i think the shareholders are making a fair call in asking to evaluate this more carefully. >> i mean, first, getting to the heart of what other investors wanted, they wanted to free up some cash here, right, which is what a lot of investors are looking for out of businesses. they want cash rather than investment. can sony -- how long can sony sort of withstand the pressure? >> they really have to demonstrate the currency has made significant progress and showing it is ready to make tough decisions and brought the company back to profitability. much of that is attributed to

certain things they have done. now is the time to take even tougher positions and in this instance maybe they don't have too much time and that is why we have seen the board is now willing to evaluate these. i think at best another six to eight months and to start showing them that the television business can turn around and foray into new parts of the business, medical emerging as well as security, etc., can ease the results to offset any lack of profitability that they continue to see. the biggest part of the business, which is the television part. >> in the end it comes down to as you say sony again becoming a source of innovation. are they ever going to be able to reclaim that crown? >> you can see that there are pockets of things that they do extremely well. they have done well in the

gaming market. they have space though they don't dominate it. it's doing reasonably well with a positive operating margin, and i think they need to get back into what had been differentiated and so successful. it is not just returning by way of renovation to a single company given the conflict of the global market that they participate in. they are one successful product away from seeing some outstanding turn around. >> thanks for that. joining us from singapore. still to come, the message from the fed is, look, things are going to improve. you need to get used to us not being there, but does business agree? we'll hear from cisco ceo john chambers when we come back. we went out and asked people a simple question:

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three-year low. india's central bank forced to step in to stop them from their fresh record low against the dollar. shrinking factory activity in china. hsbc says it's hitting a ten-month low in commodities. meanwhile, it continues to flow here in europe. we had a better than expected pmi from the eurozone. retail sales now in the u.k. may retail sales up 2.1% up in the month of may. much stronger than 8%. up 1.97 year. plus .1% was the forecast on the year. u.k. retail sales particularly

good. rising much more than forecast. and u.k. car demand in the home market continues to grow as well. the smt u.k. car manufacturing in the first three months minus .6% but in may though we're down. actually, we've seen very strong numbers out of that. the stunning number there is the retail sales number out of the u.k. and of course if bernanke is talking about the economy getting better in the u.s., which is what will taper their program. retail sales -- it doesn't mean a whole lot, but it does mean gilt futures have extended their loses by around ten ticks after the retail sales numbers. this is where we stand. european equities down. treasury yields, 2.38%. we have a 15-month high of 2.355. spanish yields up 4.76. treasury yields are continuing to rise. that puts great pressure, more

pressure on emerging markets bontds and currencies as well as you see the dollar rise too and that is all having an impact, of course, on emerging markets because of what you get for your u.s. effort goes up. that's what everything else in the world is priced as well. weak chinese data coming out, that put pressure on commodities as well. silver down 6%. spot gold we can see down 4% on the session. oil is weaker but it has other fundamentals supporting that market. if you do get set up, it's supposed to be least impacted. the currency market still up across the board this morning as well. up to 9813. it's moving away from 134.18 that we hit earlier in the week. so, the fed certainly a subject of discussion, of

course, in st. pete terseburg. interest rates rise. steve has more from the international economic forum in st. pete terseberg, steve. >> reaction to what ben bernanke did and didn't say but also looking at the chinese pmis and the concern that people have of that driver of global growth is slowing somewhat. the chinese always want to slow to create more sustainable long-term rate as well. we're not talking about immediate market reactions in st. peter'sberg, we're working out a reaction to growth and making money regardless of qe tapering and chinese pmis. a lot of big ceos, let's see what they've got to say about the u.s. economy and the broader environment. >> we thought north america would be very strong for us.

we actually look across the first quarter and three-quarters of continuous growth so we saw pretty good growth in the first quarter this year. very much the mobility. but, still, we are not investing at the moment. they are a little bit hesitant. >> it didn't change our strategy on the pmi of this week. when we're going to newer economies, i remind you we do 40% of our business in new economies, not just about russia, but all the new economies. when you go into a new economy you know you want to be part of the country so it's a very long-term investment. either we produce, we do it, of course we sell products, technologies, we give up integrated solutions. it's a very long-term investment. the whole world is a bit more sluggish than before. i think this is a reality that

we have to accept, but i maintain with my people in the organization that it's all about what we can do to improve performance rather than look for an excuse in the outside market. you heard it from the man there himself. frans van houten said, look, we are going to have our strategy regardless of what's going on in terms of the economic strategy. we can't look at what the politicians are doing. we've got to get on with it. let's take it to another big corporation. john chambers of cisco has joined us in st. pete terseburg. nice to see you. let's follow up from those comments. given the current economic environment, how is it going to go for cisco? is it about entrenchment or purely economic growth? >> if you've looked at what we've done in the last nine quarters. we've had record quarters, we

said five quarters ago we saw the u.s. turning up in terms of our enterprise and commercial business. it's been steady over five quarters. nothing to do back flips about. double digit growth in the first quarter. i'm a little bit more optimistic than some of my peers. we also put our money in. we've acquired 15 companies in the last 15 months. very aggressive. emerging markets went from 6% growth two quarters ago to 13% growth. that's where i am today, china, saudi arabia, israel. >> the emerging markets, you talk about u.s. growth as well. how's europe? >> europe is good for us. when we think of it as one europe, we're wrong. northern europe has been showing signs of improvement for almost two quarters. germany, eastern europe, russia, okay. not bad. u.k. doing a little bit better than many people are anticipating. that's what our numbers show. southern europe is bad.

it's going up. the trends are undeniable. unless something dramatically happens, the gdp is a little bit more optimistic than my peers. not as fast as we should be growing. slow improvement with a couple bumps along the way. >> let's continue to talk about the u.s. as well. a lot of focus on tapering as and when we get a withdrawal of stimulus. what is the view on what that will do to the u.s. economy and to cisco? >> i think this is where the fed deserves a lot of credit in the last couple of years. we haven't done things with deficit spending and repatriation to stimulate the economy. the fed used all of the skills that they had. so you've got a track record of calling it right. if they believe it's time to slowly taper back a little bit, the main thing is the economy is in better shape. >> it's not tapering that you want, you want tax reform in the united states. you want to get that money which

you have to hold off shore for u.s. jobs, yes? >> the u.s. tax system is broken. we've waited for years for it to come back. we're assuming that's not going to happen. we don't think that it's going to happen. that's why you see me traveling throughout asia pacific, throughout europe and you've seen the majority of our acquisitions in the past year in terms of the big ones, at least half over seas. >> you can't repay the try eight the $47 billion? >> i can't repay the try eight the $47 billion. i'm one of the big companies. still have the majority of my employees in america. this is where the tax policy can determine where you grow and where you don't. >> what do you think about the measures the g-8 leaders talked about as far as about tightening up the rules of the multi-national corporations in terms of jurisdictions and taxation as well in terms of where companies pay tax and pay

what they would say was a fair amount of taxes as well? do you think that's important or is it really just a side issue? >> well, i think it's extremely important. if you really want to mess up an issue, and that was an issue we talked about tax policy, they are the second highest tech company in the world -- tech country in the world and they're going to digitize their whole country, but if they're not careful in their tax policy, they can determine how much we invest, the startup, that's the whole future of the economy. i think sometimes when governments are trying to look where they can get money from, they tend to go after the areas that have been successful. it ought to be the reverse. we should be talking about how do we work with governments to grow jobs. i'm in china the last two weeks, when i was in saudi arabia, when i was in russia, i'm talking about growth, i'm talking about job increases, i'm talking about inclusion, i'm talking about how education and health care is going to change, i'm talking about innovation countries, i'm talking about how we partner to make it happen and that's perhaps why we're growing and

many of our peers are struggling with the economy. >> i'm going to look at this money issue because you can create acquisitions overseas with that money. some people are saying, john, with that money you can give it back to shareholders and there are other people, you and i referenced it off the air, talking about the financial, where is cisco? getting more money for investors. you're sitting on a lot of cash. >> let's talk about the real issue here. i think most people would talk about our policy. we committed to give 50% back to our shareholders. we've recently increased our dividend up to 3% of our total value of our stock. we let our shareholders decide do you want share buy back or dividends? we've listened to them. our shareholders are very happy. our stock is 40 to 50%. my peers in the network industry are almost all bound. my peers in high tech are really struggling. the data just came out in first quarter market share in terms of

products, we are number one and number two and three in 18 product areas. we're number 1 in 13. out of the top ten big markets we gained market share in nine of the ten. no company's ever done that in history. >> you've been doing this looking at the middle east, russia, china. in this internet of everything, this connectivity idea as well, what is it, 99% of people are not connected or products are not connected. this could be an interesting new phase for the ciscos of this world, couldn't it? >> it really could. this year is the next generation of the internet. the power of the network is the number of devices on the network. two phones, two times two. four phones, etc. so if you begin to think of going from 200 million devices connected to the internet ten years ago, 12 billion today, perhaps as many as 500 billion in 12 to 15 years, what that really says is the network is going to become the computer of the future. the network will be the way that

digitizes us from learning how you grow your products through your logistics to your manufacturing distribution to retail. israel will probably be the first digital country in the end. they're changing so fast. they realize this will create jobs, it will create new industries, it will create new startups. it is their future. countries who don't get that will get left behind. >> what's it like doing business in russia? >> russia has been very good to us. we've been growing 16% a year. in russia we do the same thing. we talk about innovation, we talk about creating new education programs to keep the young people here, would he talk about new industries that partner with government. by the way, we're growing. >> john chambers, c of cisco. thank you very much for your time. just to see what's coming up. we have pascal lamy, director general. and about 15 minutes after that,

in about an hour and 15 minutes' time, francisco j. sanchez from the commerce department, important man in international trade for the obama administration. we'll speak to him about where next for u.s. trade growth. back to you, ross. >> just think pascal likes trade agreements between europe and the u.s.? >> i'm suggesting that this is the man who has spent most of the last decade trying to put together a rally. 2013, you know better than i do, there is a bilateral trans pacific partnership and it could be worth hundreds of bills ionsf dollars. >> steve, thanks for that. plenty more to come from st. pete terseberg. meanwhile, let's turn attention back to japan. shares jumped as much as 11% today following a report that the factory maker is teaming up with bosh to develop the next generation of lithium ion batteries. we have more from tokyo.

hi, yukako. >> hi, ross. despite the selloff in tokyo, u.s. stock closed up nearly 6% following the news of that joint venture. germa germany's bosh and japanese trading has mitts mitsubishi being partners. bosh will hold a 50% stake in gs gsyuasa. after several reports that the battery system on boeing 787 dream liners had caught fire. talks with bosh and mitsubishi had been suspended for a while but the companies decided that measures are in place and gave it the green light. they have to start mass producing large capacity batteries. that will double the traveling distance of electric cars by 2017. that's all from the business

report. back to you, ross. >> thanks very much indeed. had reports out of the spanish bond auction. spain sold on the 2018, the five year at 3.68%, the yield 63%. a pickup which we got in april which is interesting. to cover 2.15. it was much bigger. the 2021 bond maximum yield, 4.371%. it was actually 4.49 in april. that's actually come down slightly on the 2021 as well. and on the 2023 bond yield 4.81. that is from the 4.53. but actually it's down from the april auctions. we'll get more reaction on that. where we have seen big market moves is the rupee setting a record low.

it's tapering china's manufacturing slowdown. top government advisors will take action to curb the slide. let's get more. we're in mumbai with the latest. hi, sonia. >> hi. thanks so much. as you pointed out, it has been in the market share in mumbai. it's hit an all time low of 59.94 for the dollar. there was some hint of the bank intervening and selling dollars to protect the rupee. it is an emerging market phenomenon. other currencies, the mexican currency, the south african, etc., have all seen a collapse overnight versus the dollar. so it's mainly an emerging market phenomenon. also, we've had a huge pullout of fiis from the debt market for the last one month.

they have pulled out $5 billion from the brick market in india. that is another cause of concern. now with the easing money policy coming to an end by the u.s., there are fears that there will be the emerging markets like india. that could put further pressure on the government. added to that, that refuses to go out the window as well. all in all it has been a very disappointing session in the currency market for us. let's see where we head from here. back to you. >> sonia, thanks for that, very much. the 60 level, indeed. still to come on the program, british banks are halfway to billions of pounds of capital short falls. we'll hear what the german chancellor has to say on the matter when we come back. ♪

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>> of course we have each. it's competitive. it's not only about cost, competitive measures, costs, but it's also innovation. and that's it. it's to make it a long-term system by having the debt and reducing the debt.

>> sure. sure. but when i look at 2012, the company lost 1.4 billion euros over the last year. how is 2013 going to look. >> without any guidance and don't expect for me today to get any guidance. what is for sure is that the company has less money in the past six years. this is not sustainable so my goal, my target is to turn this company back to profitability and my commitment is that this company will be cash generated by 2015. that's what this whole plan, this whole shift, this whole transition is about. >> some are saying it's too little too late. you're saying it's a troubled company and it remains a troubled company especially given the huge competitors you have, erickson and also that a

lot of the operators are just not spending in this environment. >> the company is big, 77,000 employees around the world. it's an important company with strong assets, 20,000, 30,000 patents. we aren't starting from scratch. we really need to change so two years in order to make this company brand new company and the 2 million growth factor. two years to turn this company into a growth company generating profit. this company has not generated cash since 2006 so we should be sustainable. two years to fix the balance sheet. two years to give a real change to this company and make this

company one of the highest successful tech company in that space. all right. the ceo speaking to louisea. they say they need to wait another 13.4 billion pounds. we have our u.k. editor. we're joined for more. how unexpected is this? what does it mean for the individual banks? >> i think we were expecting that the regulators came out earlier this year and said they are going to say that there's a capital short fall among eight of the u.k. banks that was about 25 billion. it's come out as 27 billion. some of that money has already been raised. 13.4 to go. while hsbc and standard charter escaped unscathed, barclays and others do have to raise capital but they're not going to go to the equity markets to do that. they're going to do that through asset disposal and that's really

key. >> the interesting thing is whether you can keep raising capital and lend money into the u.s. economy. you were there. what are the -- what did he have to say? >> i think this is the big set piece that everyone was waiting for. the bank of england was also there. this is his outgoing speech. he described his tenure as being a game of two halls. the chancellor was outlining what's going to happen with rbs, lloyds and the privatization program there. he said that lloyds was currently in a good position and it was not the right time for the government to sell the shares in rbs. >> i don't want a quick sale of our rbs shares. i want the right sale, the right sale for the british people. i will only sell our stake in rbs when we feel the bank is fully able to support our economy and when we get good value for you, the taxpayer.

in our judgment, when it comes to rbs that moment is some way off. >> to kick start the lloyds privatization, rbs, are they really going to consider breaking this up? >> yes, they're going to have a big review, one by treasury, which was a report to parliament in september and they'll say is it feasible to do a good bank option for rbs. the key here is that they have to do more money, they won't do it. >> okay. thanks for that. we'll take a short break. "worldwide exchange" continues with global assets continuing to sell off. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age.

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this is "worldwide exchange." let's look at the headlines today. following the global selloff after ben bernanke finally shows his cards. he's outlined the conditions for the fed to begin tapering its bond buying program possibly later this year. as a result, treasury yields continue to hold high putting more pressure on the u.s. markets. gold and silver slump to three-year lows. cisco is behind the fed. he says u.s. lawmakers have to work with the tax system.

>> the u.s. tax system is broken. we've waited four years for this, 50 billion, waiting overseas for this to come back. we're assuming this is not going to happen. and on top of all of that, factories in china continue to shrink. hsbc slashed the pmi. the orders are down to a 10-month low. the market is a bit weaker. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. well, if you're just joining us state side, welcome to the start of your global trading day. we're still following on the selloff post bernanke and the fed yesterday. the dow down 200 points in the course of yesterday's session. right now closed down another 100 points on the futures. we're also at the moment the nasdaq at the moment is also currently six points below the

value and the s&p 500 is currently 20 points below the value. the s&p 500 at the moment is about 10 points below the value. i've got the dow wrong. anyway, we're about 80 points below fair value. the point is we are looking negative. ftse global 300 is down. we are two hours into the trading day. show you the numbers. 5100 is up 2% to 174 points despite the fact they had a big retail sales jump for the month of may. much bigger than expected up 2.1%. xetra dax is down. ibex is down. it's still contracting but suggesting signs that we will get a stabilization of the recession and maybe some growth in the fourth quarter. let's show you where we brake down into sectors.

nothing in positive territory. orders down 2.9%. basic resources up 3%. that is the china hsbc impact pmi coming in at a nine-month low, 48.3. new orders down, demand weak from both abroad and at home as well. the commodities getting whacked on the back of that. you can see gold lower as well as copper. spot gold 1310. we have been down to the lowest since september 2000. copper up 2%. oil is down, not heavily. there are a lot of other supporting factors in terms of oil supply. a big spike up in treasury yields. we went up, 19 basis points, 17 bases points. treasury yield, nearly 2.39%. gilts, 2.72%. that's putting a lot of pressure on the emerging markets. the dollar is stronger across

the board this morning. 97.87 is where we stand moving away from 93. the euro has moved away from the four-month high. commodity markets getting hit fairly hard. it's a fresh 33 month low. the rupee in india is fresh lows as well. 5973, nearly up to the 60 level. the india central bank coming in to support that. the rand is lower as well. the emerging markets getting hit. that's had an impact. on the rest of the asian activity, we have the information on what's happening today. >> thank you, ross. similar here in asia. investors were upset over the fed's signal to stop bond buying. the asia pacific index which tracks japan's biggest one day

drop in nearly 20 months, down by about 4% at the moment. hong kong listed chinese bank got a beating today after the money hit historic heights. they were hurt by the pboc's refusal to pump more money into the system. australian minors down sharply after hsbc's pmi slashed orders. remember, china is australia's biggest customer and also for investors with profits, the dollar will fall further. the fed's tapering could put more pressure on commodity prices. 6 6.5% today to the slowest growth in months. samsung electronics is down by almost 3%. and over in japan, nikkon ton w

down almost 6%. despite the weakening yen we saw broad based selloffs and in fact exports in general. back to you. >> thanks for that. now we'll detail that chinese data in just a moment for you, but first some news out of france concerning google. regulators are suggesting that -- they ordered google to respect the rules in three months. they said sanctions may follow if google doesn't fly. this regulatory order it comes amid the probe on google. they're saying google is not respecting their current privacy laws. keep your eyes on that. but the bigger picture here, besides what mr. bernanke is saying, china's economy is weakening. just to recap the flash pmi down a nine-month low, much lower than what we saw in may. eunice has the details for us in beijing.

eunice, two things, what does this mean for the growth rates and what kind of response might we get? >> well, right now a lot of people are just talking about how we're seeing the chinese economy slowing down even further. these numbers that we saw today are showing that there's a contraction in the manufacturing sectors. a little bit worse than what people expected and what people are focusing on mainly is a pronounced fall in new export orders. a lot of that is just reflective of the fact that we're seeing a weaker demand globally but also some weakness at home. now in terms of the policy response, there are a lot of people wondering what the government is going to do because up till now, over the past several months we haven't seen the government really step in at all. they've been allowing the slowdown to happen. there have been a lot of thoughts that the leadership is making good on its promise and saying that it's able to tolerate a slower rate of growth and there's been a lot of comments to suggest that the government is okay with that but

because as you've been reporting over the past several hours, there's also a credit crunch here. there is a lot of questions as to just how long the policy makers are going to be able to keep this stance of not getting involved, not only in terms of the economy but also getting involved in really helping the banks right now who are seeing a bit of a credit crunch. >> much will depend on their view of inflation, i guess. so what is that? >> well, right now the view is that there is some room for loosening. we are seeing that the inflation rate is looking pretty low, but what we're seeing here is that the policy makers in china are in a really great big dilemma because on the one hand they know what the consequences are of too much stimulus. they have these property bubbles happening or at least the risk of property bubble. there's rising debt. they're really concerned about that. they do not want to flood the whole system with cash, but on the other hand they also have

all of these bankers saying we need this cash. we're in a credit crunch. things are going to get bad and the financial sector could lock up if you don't do anything and if you don't do something soon. so they're in this kind of very difficult dilemma for themselves, but as we've been seeing so far, there hasn't been much action on the part of the economy and so that's leading a lot of people to believe that we don't know quite whether or not they're going to be changing their stance or not. >> eunice, thanks for that. that's the latest out of china. so that bit of data coming on top of what mr. bernanke says saying the fedotenko start to scale back its bond buying program and end it if the u.s. economy continues to improve. his comments saying the fed is seeing greater optimism. the unemployment could drop to 6.5% in 2014. that's a year earlier. the gdp could spread to 3% over

the next two years. bernanke tried to draw a distinct line between the tapering. they don't see a hike until 2015. >> the most important thing that i just want to convey again is that it's important not to say this date, that date, this time. it's important to understand that our policies are economic dependent. >> two fed members dissented at the meeting, ester and george bullard. he thinks you need to keep that in place. joining us in new york is martin. thanks for joining us. that treasury yield backup has continued this morning here in europe. how much further do you think it can go? >> i think we can see a little

bit more. there's been moderate change but the market dynamic going here, technical, a lot of investors heavily in treasuries because of the fed policies and even without a big change in the economic picture as a result of any nuance change in the fed's policy, the trading dynamics could take over and push rates somewhat higher than the fundamentals might say. >> they're reacting to it more than in a nuanced fashion. >> that's right. initially there was a great deal of puzzlement if you follow the commentators on cnbc following the fed's -- bernanke's statement. there was some puzzlement about the violence of the market reaction initially to those

statements because they pointed out that if you look at the official policy statement, it wasn't that much of a change. chairman bernanke was at pains to emphasize that there was a lot of wiggle room. he talked about this policy, potential tapering being letting up on the accelerator rather than stepping on the brakes. he spoke about the 6.5% unemployment rate being a threshold rather than a trigger, that unemployment rate had to be interpreted in light of the participation rate, for example. he said that when the tapering occurs, the fed will not sell their bonds it owns and it will roll over the maturing debt. so there was a lot of reason to say this isn't really much of a change at all and that's why there was surprise by the commentators about the extent to which the market responded.

but i think that with a little bit more time to think about it, what the commentators realized is that what bernanke did not say was, well, remember that statement i made about a month ago? we didn't really mean it. we're not talking about any major slowdown. that was an overreaction. he didn't say that. he reiterated the idea that they were going to be the tapering. >> and there might have been, i presume, some expectations that he would have had some more soothing words and he didn't go to try and soothe anybody's fears in that sense. maybe also that at play. >> no, that's right. i don't think he went to soothe. he just tried to emphasize that there was a lot of flexibility, that it wasn't a rigid policy in place as to when they would

start tapering, how much they would do. and he underscored that that was very separate from raising interest rates, which was not contemplated until 2015 and 2016. clearly the market took the message that he wasn't kidding in the statement and we should be starting to look toward a cutting back of the quantitative easing. >> yeah. okay. stay there, martin, because we now have to get into, you know, how we now deal with this reduction of liquidity and what that means. more to come from him. we're also keeping our eyes on google. the french privacy watchdog and now the italian privacy watchdog is watching google with data over possible privacy violations. we'll take a short break. keep your eyes on the futures as well because right now we're

lower. it's slightly down from 51 points. it picked up slightly. it's important to get away from everything once in awhile. well, everything but palm trees, sunshine and fruity drinks, that is.

>> announcer: you're watching "worldwide exchange." just going this morning, recapping the headlines, ben bernanke offers more information. the market pressure of global assets. gold and silver slumping to a

near three-year low. dwindling factory data out of china adds to the gloom with a ten-month low. commodity and commodity stocks. meanwhile, steve is in st. pete terseburg. >> i apologize for hijacking your show, but when you look at the guests we have coming up, we've got pascal lamy coming up. what about the wto make of the new bilateral trade agreements that are being arranged. we'll also speak to francisco j. sanchez who's the under secretary of commerce for international trade over at the commerce department as well. we'll ask him where the u.s. is going and is it quickly enough to keep the momentum on the economic front. and who made the following quote, the french have got beautiful women but they have no idea how to run a business?

well, i can tell you it was the ceo of tyson, the tire maker. we'll speak to him after this very short break. ♪ [ engine revs ] ♪ [ male announcer ] just when you thought you had experienced performance, a new ride comes along and changes everything. ♪ the 2013 lexus gs,

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exchange" from st. pete terseberg. we're speaking with a lot of ceos and policy makers. just what's going on over a long time and not just short time reaction. we've spoken to john chambers, the ceo of cisco who is seeing new growth in his company outperforming their last set of numbers. what do they think of policy at the central bank? this is what john chambers had to say about bernanke and the fed. >> we owe the fed a lot of credit for what they've done the last couple of years. we haven't helped them much with our deficit spending. we haven't done things on tax policy and repatriation. the feds have used everything they've had. if they believe that it's time to slowly taper back a little bit, the main thing is that the economy is in better shape. >> it's not tapering that you

want, you want tax reform the united states. >> the u.s. tax system is broken. we waited for four years for over almost 50 billion overseas to come back. we're assuming that's not going to happen. we're not moving with the speed for it to come back in many places around the world. that's why you see me traveling throughout asia pacific, throughout europe. you've seen the majority of our acquisitions in this last year in terms of the big ones. >> you can't repatriate the $47 billion? >> i can't. we still have the majority of our employees in america. this is where tax policy can determine where you grow and where you don't. >> a lot of consulation in the markets about what the fed is doing. less so in the business community who are seeing some grassroots growth in the united states but only seeing it across the globe. are they seeing it in europe as well? i'm delighted to well come to "worldwide exchange" maurice who

is the chairman of tyson. very good to see you. >> good to see you, steve. >> what are you doing in russia? nkts we were invited over because we made our first acquisition here in russia in the tire plant. we have 42% of the north american tire market and we have 42% of the agricultural market here. we're following our customer base and we're excited about it. >> european market is struggling. i know you're looking at the agricultural side in terms of investment here as well, but is there the tire industry in what we're seeing in the new car industry or is that not representative of the bigger picture? >> no, i think you have a situation where there is so much

out there in the mass of people that have information on what's going on and, you know, the governments -- most governments take the attitude that they're out of money so they need more money. so it's just everybody's running down the wrong side of the road, all right? we've got to back up and i think your previous guest told you the fact that they've got over a trillion dollars that's sitting off shore because you don't bring it back. you've got to pay 35%. you have to pay tax on it. bring it back, you know? it's a simple situation. >> your payments in the last year, i don't know where to put it. you are misquoted. i'll put this one out here. the french have beautiful women but they have no idea how to run a business. do you still stand by that, yeah? >> i stand by it in reference to what i said. i stand by it in reference to women.

running a business, there is some great businesses there, but the -- they have no idea when it comes from a government's perspective what you have to do. to hire an employee, you have 3200 pages of rules. how in the heck -- >> you have 73,000 of pages of rules in the u.s. tax code. come on. >> that's why apple didn't have to pay any taxes, you see, because they've got that many. you really have to bust that all up. when you look at it, like the 72,000 pages in the tax code, all of that is to perpetuate bigger government. >> let's put it another way. i think the french business is very, very good at running a business. with that as the back drop, it's going to be twice as hard if they have all of those rules. >> it is. it's very difficult. you know, they have a 35 hour work week. that's what really got me in trouble, see? if you think about it, france, you look at all the great things

about france. more than 35 hours a week, somebody had to work harder. >> tell the viewers about that. >> it was my wife -- >> cnbc, not only was maurice backing up what he said about the french, it was actually his wife who got him into trouble. maurice, lovely to see you. >> thank you. >> maurice, the ceo of titan. pascal lamy coming up after the break. we'll talk to him about trade in russia. francisco j. sanchez within the hour as well is up from the commerce department. is the u.s. growing quickly enough? we'll find out. ross, back to you. >> if you've just tuned in, this is where futures are trading after a fall in the dow yesterday. the low once again this morning. currently down and the dow is down after the global selloff continued. in emerging markets, we'll see the treasury continuing to back up. all of that in just a minute.

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"worldwide exchange" recapping the headlines this morning. the global selloff after ben bernanke finally shows his cards outlining conditions for the fed to continue its bond buying program possibly by the end of this year.

treasury yields are still heading high. more pressure on the american market. gold and silver are slumping to a three-year low. the cisco chairman says the tax system is broken. >> the u.s. tax system is broken. we waited for it to come back. we're assuming that's not going to happen. we don't think removal of the key leaders in the key index in many places around the world. we're not being helped by factory orders in china that are still shrinking. hsbc slashed pmi for a ten-month low. commodities for the key sector. >> announcer: you're watching "worldwide exchange" bringing you business news from around the globe. if you've just tuned in this

morning, global markets, futures are pointing down. the dow is down around 60 points. the nasdaq at the moment is down. s&p 500 is currently around eight points below. european markets down around 2% right now. dax and the ftse down. really strong u.k. retail sales for the month of may, all of which have a yield this morning. this is on the back of mr. bernanke saying the fedotenko start to scale back its bond buying program later this year. still with us in new york, he's been very patient, is martin. thanks for sticking around. i hope you got a cup of coffee. look, you're seeing the market reaction here. i mean, i guess there's a

calculated risk going on here that they must be confident that growth are firmly improving and they'll do even better in the future. now let's suppose they are right. what is the right investment strategy now? >> well, assuming we have positive implications for stocks fundamentally, the problem is that in the short run the tap tapering back is going to be taken as a negative. that's certainly going to be harmful to bonds although i think bonds will find some support as rates go up. we've had a pretty big move to be at 239 on the ten year not that long ago being around 1.6%. so around 2.5% i would expect to see some interest developing in the bond market. so those are the factors we're

dealing with right now. >> clearly it's interesting. there's expected risk taking. we can go at it in an orderly fashion. ten year treasury's now at 2.4%. so if we are -- if the yields continue to back up, the question is is that yield that has driven everything becomes less of a driver, doesn't it? >> that's right. i think a lot of the money that's in longer data and lower quality gap has been a function of very, very low rates on the more conventional vehicles that a lot of those investors would be in, and i think that we would see a continuation of some of the very large withdrawals that we've seen from the -- particularly the high yield

mutual funds and credit products in general. >> just talking about sort of the high yield area wherein vestors have gone. how much unwinding do you expect? how volatile is it going to get for the next few weeks? >> oh, i think we can expect to see continued volatility and it could be on the up side as well. you have a lot of investors, really speculators and more aggressive money managers, not necessarily the small investors, who are using the e.t. out as a vehicle for trading in and out of the market and they can swing either way on short notice so i think we're in for a period of continued volatility. >> thanks for that. we'll come back to you for a final recap as well.

and of course we also are at the st. pete terseberg forum. being denounced by the country's government. the press release was set up to say the prime minister had authorized the decision. steve is there and jeff has been there. you haven't seen jeff this morning but he is there. hi, guys. >> it's quite extraordinary, ross, there i was sitting here with john chambers doing my time for "worldwide exchange" sitting here with maurice about the french again and working really hard. he's been off talking football, haven't you? >> absolutely. when alisher usmanov says he's willing to sit down and do an hour long conversation with you, he has a 30% stake. >> that's not fair. >> . >> apparently you can.

let's start with soccer. he has a big bee in his bonnet about the way arsenal is being managed. he thinks too many good players like van persie has gone to other teams. >> it's a metaphor, isn't it, for the austrians. >> pretty much. >> arsenal didn't spend money, they live within their means. they're more like the kings in manchester united. >> what's interesting is even though arsenal has had to sell some quality players, his take is that they remain rock solid. that was the point he kept coming back to. i have faith in oscar's ability to manage this team even as he's had to accept that some of the top drawer players have been sold off. they've got a small war chest. they do want to buy some more players. i talked to him about whether rooney is the right man for the job. >> he plays soccer as well.

>> he said most of the interview was in russia but he broke out into english. he said rooney will be good for arsenal and arsenal will be good for russia. >> you didn't swing into english? >> no, i wish. >> he has serious business concerns. he's really, really worried about it. >> yes. when we had our world exclusive with him back in december this was one of the issues that he brought to the table. we fear the derivatives market and we came back to this in this conversation. there are some institutions that are trying to get the ceo market started again. he made the point if you look at the size of the derivatives market still, you'd have to be crazy not to feel slightly alarmed by the size and scale

compared to the upper lines. a bit of a warning that he remains a strong believer in the apple story, facebook story. he has internet investments in china. still thinks they're a good place to put cash even worried about volatility. >> on this show we're going to speak to pascal lamy. interesting relationship, i think, as well. plus, we're going to speak to francisco j. sanchez from the commerce department, talk about u.s. growth, u.s. exports. he's a man who's an architect of the export strategy for the obama administration. all of that coming up on "worldwide exchange" ross. >> look forward to that. i was going to say it's like watching the muppets, but in a good way. >> rudolph and sadler. >> can i be kermie. >> that's the two old guys that sit in the balcony. >> ross, what are you saying? >> i'm agreeing.

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now a pair of high profile

executives are finding themselves out of a job today. we've got more at cmchq. not martin, but kayla should be there. hi, kayla. >> hey, ross. good morning to you. standards energy has ousted founder and ceo tom ward after a month-long struggle with activist investors. they've accused ward of several strategic mistakes. the company's been under fire since last year when kpgm -- after a four-month probe the board determined there was no wrongdoing in the land deal but they did strike a deal in march to close it by june or move the hedge fund. this termination is the same with another condition, chesapeake energy.

it's 3% after hours and the stock is still on the move. it's up 7.25% right now in trading in germany. on wednesday men's warehouse showed george zimmer the door. zimmer founded his clothing retailer in 1973 said the company is appearing in ads, you'll like the look, i guarantee it. in a statement zimmer said he had expressed concerns about the direction of the company and instead of what he called, quote, fostering the dialogue that has in part contributed to our success, the board has chosen to ignore my concerns. they have a scheduled shareholders meeting but it was canceled so they could renominate another executive without zimmer. sales are up 5% in the most recent quarter. analysts are speculating zimmer and the board may have spent more on advertising.

the board has been evaluating whether what zimmer said resonated with them. they're up about 18% this year. they're still down in early trading just about 1%. ross, certainly a big events week in the corporate world in the u.s. >> tough when it gets personal. kayla, thanks very much, indeed. if you're just joining us, ben bernanke offering more clues on the qe. it has a big market impact for pressure on global assets. gold and silver slumping to a near three-year low. emerging markets selling off and not helping. china adding to the glim yield. a 10-month low. still to come, when mr. bernanke talks, the markets listen. they don't like what they heard so what happens next? in the name and sophistication. but to us, less isn't more. more is more.

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well, welcome back to "worldwide exchange." what are the chances that between the start of 2010 and the end of 2014 the u.s. adding 2 million jobs through export industries and actually doubling the amount of exports in the u.s. by the end of 2014? that's one of the policies which the obama administration has pushed forward and the architects of that policy on the export front is with us as well. i'm delighted to welcome to the show francisco j. sanchez who's the undersecretary of commerce and trade at the u.s. department of commerce. thank you for joining us. >> great to be with you. >> tell us about the policy of doubling exports and getting 2 million jobs. how are you doing? what's your report card now that we're midway through 2013. >> let me say that the president early on in his term realized that exports had to be a key ingredient to the economic recovery and to sustainable economic growth. he set a goal of increasing

exports and increasing jobs by 2 million jobs. we're doing pretty well. we've had three years of the five-year period we've seen employment go up 1.3 million so we're more than 60% toward our goal of employment. on the doubling of exports, we're also making progress. 2011 was a record year for us. 2.1 trillion in u.s. exports. 2012 was another record year. >> i have a good idea. why don't you -- instead of the imports which we know what they're going to do, they're exporting all of that oil, all of that shale as well, that's going to be a driver, isn't it? >> i think it can be. and we already make it pretty easy for countries with which we have free trade agreements to import from us l. and g. those who don't have free trade agreements have a more rigorous analysis with the department of

energy. >> whether you see the world becoming a better place for free trade or a worse place? . there are a couple of stories. we know there are issues here with russia and its obey yans of wto rules. the e.u. has started down the road on a spat with china over solar subsidies. are these damaging, do you think, to the prospects for a more open trading system? >> i'm very optimistic about the world looking to reduce barriers rather than increase them. our own experience with the trans pacific partnership, when japan joins later this year 12 countries working together to reduce both tariff and nontariff areas in the asia pacific region. just next month the united states and the e.u. will begin talks to put together what will be probably the biggest trade agreement in the world ever, and i would give russia a little bit of a break because they've been

in the wto for less than a year. and we're working closely with them to help them reach full compliance. so, no, i'm very optimistic that we're moving in the right direction on free trade. >> one of the reactions to economic slowdown is as we all know is protectionism as well. you talked about the e.u. trade deal with the u.s. we have the trans pacific partnership as well. that was in the state of the union speeches. we know that's a big driver as well. what are the biggest obstacles to delivery? >> well, the ppp i'm happy to say is moving along quite well. we've been negotiating this for just under three years which for 12 countries, that's lightening speed. and i think we're on track to complete that within a reasonable time frame. obviously as you get closer to the end the tougher issues are still on the table and that's going to be challenging, but i'm confident we can get there. >> the u.s.e.u., our tariffs are already really low. the opportunity is in working more cooperatively in

regulations, working more cooperatively on standards. >> mr. sanchez, we have to wrap it up. asking you about bali, dohar. gone, isn't it? >> i'm not prepared to say that. a lot of companies have to step up. it's not just the united states. if we can all step up and do something that makes sense for all countries, then we can make progress. i'm not quite ready to give up on it. >> great to see you. thank you very much, indeed, for finding us on the set here. >> thank you for having me. >> francisco j. sanchez. the undersecretary for commerce and free trade at the u.s. department of commerce. back to you, ross. >> thank you, good stuff. right now let's get a countdown to the u.s. open. martin is with us still. gentlemen, the treasury yields this morning, ten year hitting 2.4% on the year. the market clearly not comfortable with what the fed is

doing. why is there a disconnect? why do they view this as a shift in policy, a tightening of policy? >> i think despite bernanke's best efforts yesterday, he spent a lot of time in his prepared remarks and then during the q and a to make the distinction, saying that they're tapering, they consider it easing, and raising rates. for some reason the bond market didn't listen. it's difficult to say why. if you look at things like inflation expectations, even embedded markets, they're pretty low. actual readings of inflation are low. i think maybe what the bond market's reacting to is that global growth is getting better. we've sort of seen the worst and now things are only going to get better. bond yields probably dump along much below 2%. the bond market is correcting. markets overcorrect and i think that's the phase we're in now. but i think certainly you can say that the 30 year long drop

in yields is over, probably ended last year and we're headed higher. the question is how much higher. >> it's not getting better if you look at the chinese data. that's been whacking commodities. the fed said we're going to get a steady improving economy in the united states. in the long run that should prove beneficial. do you agree that is actually what's going to happen? >> i think what the fed's betting right now is that over the second half of the year that the economy's going to improve more than the consensus thinks and so if that's the case perhaps the rise in bond yields we've seen in the last couple of days is justified. on the equities side, i think what is ultimately going to prove to be the case is that the fed tapering quantitative easing which is outcome based rather than time based as it was before should be a positive for equities but there again i think it's going to take time for

markets to adjust to the new reality of less participation from the fed. but ultimately the fed, we do see stimulus, they're doing so because they think the economy is able to withstand it. so i think a big debate in the second half of the year is going to be the bond market versus the fed and then the bond market versus the stock market. i think overnight and this morning right now i think the bond market is winning and the fed and the stock market are probably losing. >> do you agree with that, martin? also, if we get heightened volatility, that's just going to mean greater risk aversion, isn't it? >> yeah. i think that you're going to get greater risk aversion because of the volatility. i think that is a change that we're seeing. i think that while the market, you know, claims -- the surveys of economists indicate they're not as optimistic about the economy as the fed is. for that reason there ought to

be less concern about the tapering coming sooner rather than later, but i think the real reaction in the market is the fed, bernanke not saying that we're going to hold off. there is a view that the statement of a month ago by bernanke was a trial balloon to see how the market would react and there wasn't really a change in policy and i don't think that investors who took that view got any real comfort from chairman bernanke's comments yesterday. >> john, very briefly, how high could 30 year treasury yields go in this move? >> right now we're testing that 240 level, which you'll be seeing -- we saw those in late 2011, again in early 2012. i think if we can hold that, we might head back lower. if we break that, you might be headed closer to 275 or 3%.

we continue on "squawk box" which comes up in a few moments time. we'll continue on our discussion. might head back lower.

global markets reacting and all of that talk in asia. and even though we sold off, we have a negative open indicated this morning as well on wall street. it's thursday, june 20th, 2013, and "squawk box" begins right now. ♪ ♪ good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky along with andrew.

stocks falling into the close yesterday after fed chairman ben bernanke hinted that the fed bank could slow down bond purchases later this year. >> if the incoming data are broadly consistent with this forecast, the committee currently anticipates that it will be likely to moderate the purchases later this year. if they remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year ending purchases around mid year. >> the bonds finished in the red as the blue chip index showed its seventh straight move. all the main s&p sectors closed lowers. the worst performers were defensive sectors. telecons. this is what people had been warning us, look out for those stocks that act more like bonds. that's exactly what happened yesterday. the yield on the ten year treasury, it hit a